Where Amazon is heading on health after Amazon Care fails

In this photo illustration the Amazon Basic Care logo seen displayed on a smartphone with an Amazon logo as the background.

Thiago Prudencio | SOPA Pictures | Light flare | Getty Images

Fall for another failure in healthcare for Amazon, one of the ultimate market disruptors.

First, his high-profile effort with JPMorgan and Berkshire Hathaway to reform health care Haven ended his short life.

Now, Amazon Care, its push to tackle telemedicine and primary care for the nationwide employer market — which Amazon itself has trumpeted as winning more and more customers — is on its way. closing.
Is this the only proof we needed of what many people have said over the years: healthcare is simply harder to disrupt than most industries?

Maybe not, though it may be a sign of a shift in approach to how Amazon will try to gobble up more market share in the healthcare industry. The shutdown of Amazon Care could come down to a simple choice companies, especially those with lots of cash, have to make when entering new markets: build or buy?

For some health care industry watchers, it’s no surprise that Amazon Care is disappearing as a standalone entity. When Amazon made the decision in July to acquire primary care company One Medical, which is doing what Amazon Care ultimately hoped to do nationwide, it was the writing on the wall that something was about to change. . And for a cash-rich company looking for buying opportunities in a stock market that had recently depressed the value of public health companies – One Medical had traded as low as $58 in 2021 and Amazon announced its intention to buy it for $18 a share – Amazon may have been more opportunistic than anything in charting the next stage of its health future.

Buying in a market where it wants more market share and where it requires a physical presence is nothing new for Amazon, nor is it opportunistic in timing. As Amazon’s acquisition of Whole Foods hits the five-year mark, it’s worth remembering that Amazon’s stock value rose as much on the day the Whole Foods acquisition was announced as the price of purchase of the struggling high-end grocer.

“It’s no surprise they’re shutting it down,” said Sari Kaganoff, managing director of consulting at Rock Health, which invests as a VC in health start-ups and has a consulting arm and health research. “Their vision has always been to have an integrated primary care solution and now they will have a better solution than they could build,” Kaganoff said.

It was perhaps a little surprising that Amazon announced the shutdown before the One Medical deal even closed, but One Medical has far more markets, far more offices, and far more corporate customers than Amazon. never had one (she had to brag about signing up to Whole Foods, which he owns, as an Amazon Care customer). Perhaps also surprisingly, it didn’t wait to rebrand One Medical as part of Amazon Care. PillPack, its pharmacy acquisition, still has a brand but is now integrated with Amazon Pharmacy.

According to Amazon’s own account, Amazon Care was a failure, at least in the terms conveyed in the internal memo provided to the press about the shuttering. There’s no doubt he’s struggled with the problem of building an in-person care component nationwide, staffing in an industry where he has a limited history, and signing companies clients. While telemedicine is a plus, it’s not a complete healthcare solution, and Amazon should have significantly increased its investment to create a truly national hybrid healthcare practice with sites, doctors, and clinics.

Ultimately, let’s say Amazon Care was a test for a business, and once Amazon learned enough to know what it wanted long-term, it bought the best business at a time when its value was depressed.

“I don’t think they failed because One Medical is awesome,” Kaganoff said.

Amazon has learned a lesson that has shaped the fortunes of many healthcare disruptors in recent years: It’s hard to run a standalone startup in the industry — even if you’re one of the wealthiest companies in the world — consolidation increasingly is the way to go.

“Amazon Care was no different than any other independent health startup in terms of needing consolidation,” Kaganoff said. “They played with it a bit,” she added, enough to know that their ambitions remain validated in the market, but not for all that.

“One of the ways we have worked towards this vision over the past few years has been with our emergency and primary care service offering, Amazon Care. During this time, we have collected and listened to extensive feedback from our enterprise customers and their employees and has evolved the service to continuously improve the customer experience. However, despite these efforts, we have determined that Amazon Care is not the right long-term solution for our enterprise customers.” , indicates the internal memo.

While Amazon’s healthcare efforts over the past few years have been associated with head-to-head battles to overthrow recent healthcare disruptors (e.g., Amazon Care vs. Teladoc), Wall Street analysts said that the market should be more concerned about Amazon making a series of acquisitions that speak to broader goals.

This seems to be happening.

Amazon isn’t done pushing its money to buy more healthcare just yet, with recent headlines reporting it is among the bidders for Signify Health, which overlaps with One Medical’s Iora Health business. focused on a more complicated, Medicare-centric market than national standard care practices.

It’s clear that Amazon still plans to be a formidable player in healthcare. It can capitalize on its ability to personalize its offerings, connect to its pharmacy, and ultimately pose a threat to many other retail giants aiming to disrupt healthcare. Walmart acquired telehealth company MeMD in 2021; CVS, which already offers telemedicine under a deal with American Well, is another rumored bidder for Signify; and Walgreens has VillageMD and is opening hundreds of offices in markets across the country.

This retail disruption is only going to grow, for one fundamental reason. When you look at share of wallet, from consumers to employers, the health care market represents a large portion of spending. Amazon is already in almost every piece of the wallet, maybe not in banking (although it does have credit cards).

What’s the biggest chunk of the market they’re not in?

“It’s healthcare, and they already have so much stuff focused on consumer health, it makes sense to go big in healthcare,” Kaganoff said.

When Haven – which disbanded after three years – debuted to much fanfare, people thought the combined power of Berkshire Hathaway, JPMorgan and Amazon could drive down costs significantly across the healthcare system that Warren Buffett called a tapeworm on the national economy.

And that’s still part of the story. Part of everything Amazon does is reduce costs and increase efficiency. “Better care for less,” Cano Health CEO Marlow Hernandez told CNBC last week is the paradigm shift for everyone in the space.

Amazon’s consumer internet business may be the ultimate in transactional disruptors, but the transactional healthcare system is under threat and people don’t want to treat it like another form of retail. “What patients are asking for is this integrated platform where they can build relationships and stop being a number,” Hernandez said.

It’s called value-based care — and maybe it’s a sign of how messed up the American healthcare system is, ‘value’ for the patient is a novel idea — and it leads to a lot of consolidation. Hernandez predicts the primary care market will grow from $1.8 trillion to $3.7 trillion by 2030.

And that reflects the underlying purpose of any large company like Amazon and its rivals.

“I think it’s just market share,” Kaganoff said.

The end of Amazon Care seemed brutal. But as Amazon moves from primary care to more complicated care and potentially even chronic care — and combines pharmacy and over-the-counter drugs with all of its offerings — everyone from private health start-ups to Teladoc, through to retail competitors and healthcare incumbents should continue to worry. Amazon Care’s failure may have come at a cost and may have come as a surprise, even to some within Amazon, but what the company ultimately buys and builds may still make it the most powerful disruptor.

About Robert Wright

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